Profession Practice Standards

Number 11! US PCAOB publishes yet another Canadian accounting firm inspection report

Saturna Group of Vancouver the latest report in a busy year for US audit watchdog

Author: Canadian Accountant

TORONTO, Dec. 4, 2022 – With the recent publication of its eleventh Canadian accounting firm inspection report, the Public Company Accounting Oversight Board in the United States is approaching overall numbers that not seen since 2016. The US audit watchdog published its inspection report of Vancouver accounting firm Saturna Group Chartered Professional Accountants LLP, amidst another flurry of both domestic and international inspection reports. 

Saturna Group was founded in November 2008 by two CPAs, Lonny Wong and Henry Chow, and it specializes in serving public companies and companies looking to go public, in Canada and the United States. The firm has audited several small cap companies on the Canadian venture exchange from cannabis to pharmaceutical and biotech companies. 

The inspection report, which was completed on September 15, 2022, pertains to two audits conducted in 2021, in which Saturna Group was the principal auditor. The PCAOB also inspected the firm in 2019, during which the firm was the principal auditor of eight total issuer audit clients. In this report, the watchdog stated the firm had deficiencies in both audits related to Part 1.A of its report, audits with unsupported opinions, noting “it does not necessarily mean that the firm has not addressed the deficiency.” 

In both cases, the PCAOB noted deficiencies related to Significant Accounts for both issuers. For Issuer A, “the firm did not perform several procedures to test whether the issuer appropriately recorded this significant account.” For Issuer B, the firm did not evaluate whether the issuer’s determination of the fair value of a significant account was consistent with the valuation method.” 

The firm was also non-compliant with AS 1305, Communications About Control Deficiencies in an Audit of Financial Statements, related to information communicated to the issuers’ audit committees. 

Erica Williams
PCAOB Chair Erica Williams was appointed in 2021 and the audit watchdog's board was overhauled. 

PCAOB returning to pre-Trump levels of inspection reports

As reported previously by Canadian Accountant, the PCAOB recently warned international stakeholders that the US audit watchdog was intent on strengthening enforcement, including “enforcement actions cross borders.” The PCAOB has published 212 inspection reports thus far this year, a level not seen since 2016, during which it would 215 reports and would regularly publish more than 200 reports per year. 

During the presidency of Donald Trump (2017-21), critics accused the Trump Administration of “eviscerating” the PCAOB, beginning with the appointment of Chairman William D. Dunkhe III, who was appointed in 2018. Current chairperson Erica Williams was appointed in 2021 and the Board was overhauled. 

With 11 Canadian inspection reports published this year, the PCAOB is now within sight of its 2018 mark of 13 reports, its highest number being 26 reports in 2011. While the publishes its inspection reports online and provides details related to firms and their compliance, the Canadian Public Accountability Board (CPAB) publishes anonymous semi-annual reports that disclose trends but not the names or details of the firms its inspects. 

By Canadian Accountant staff with files from the PCAOB. Images courtesy: PCAOB. Read the Saturna Group inspection report here.

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